Roger S. Conrad

About nine of every ten Utility Report Card coverage universe companies have now reported Q1 earnings and updated guidance. Takeaway number one: Even among essential services providers, COVID-19 fallout varies greatly.

Every earnings season my first priority for analysis is the Portfolio. Despite the unprecedented uncertainty, I’m happy to report the vast majority of recommended companies were able to issue meaningful guidance. And not only that, the updated forecasts are by and large in line with their expectations three months ago.

That’s truly extraordinary, considering the global economy has suffered its most dramatic setback since the Great Depression of the 1930s. There’s no guarantee even the best in class of essential services won’t ultimately succumb, if the big picture gets cloudy enough.

Communications traffic is surging while the global economy shrinks. By and large, sector companies didn’t convert that to higher profits or even revenues in Q1. But the emerging trend is faster adoption of 5G, with a resulting earnings liftoff for industry leaders the next few years.

The customer is always right regardless of what business you’re in. And for regulated energy utilities like Dominion Energy (NYSE: D) now, that means using more wind and solar to generate electricity.

Most CUI Portfolio stocks have run in place since the April issue. But the past month has been far from uneventful, with 34 of 38 recommended companies reporting their first results and guidance updates since COVID-19 fallout hit the scene.

Five Endangered Dividends List companies cut dividends last month. For Covanta Holding (NYSE: CVA), NuStar Energy (NYSE: NS) and Royal Dutch Shell (NYSE: RDS/A), the decision was all about COVID-19 fallout.

The Dow Jones Utility Average is nearly 30 percent higher than where it closed March 23. But since mid-April, utilities and essential services stocks have essentially run in place. In fact, most have given back a fair portion of their recovery, as increasingly excited investors have gravitated to traditional “growth” sectors.

Roger Conrad will host an online chat for Conrad's Utility Investor subscribers on May 14, 2020 at 2 PM Eastern time.

Heading into Q1 earnings reporting season, the big question for electric utilities was how big a hit COVID-19 fallout would deliver to demand for power. Now we have answers from first reporter NextEra Energy (NYSE: NEE).

In 2017, financially recovering Kinder Morgan Inc (NYSE: KMI) promised investors three dividend increases. This week, for the third increase it offered up a 5 percent lift for 2020, just 20 percent of what was promised. Under normal conditions, I’d view a shortfall like this as a potential warning of underlying business weakness. In Kinder's case, here's why it's not.